ENP Newswire -
Release date- 21072014 - Risks of Prolonged Slowdown with Growing Fiscal Deficit.
Amongst the hard choices for the near-term is tackling fiscal vulnerabilities. Depreciation of the Rupiah and higher international oil prices have enlarged the fiscal deficit, due to increased fuel subsidy spending. Weakening revenue performance also increases the fiscal deficit. Total government revenue-to-GDP has dropped down from 16.3 percent in 2011 to 15.3 percent in 2013.
'Capping the deficit at 2.4 percent of GDP, as projected under the revised 2014 Budget, will be difficult, especially if global energy prices continue to increase. Steps taken to improve the quality of spending through fuel subsidy reduction and preventing further deterioration of tax and non-tax revenue collection, would ease pressure on the deficit,' says
The new government will also face the longer term challenge of addressing increasing inequality. The high rates of poverty reduction in the past decade are beginning to slow and the gap between the rich and poor has grown. In 2002, the top 10 percent of households consumed 6.6 times more than the poorest 10 percent. By 2013, the affluent was spending 10 times more than the poor. Even after many years, many workers are unable to earn higher incomes which threatens to bring families back into poverty.
Increasing inequality is a serious concern. 'Rising inequality carries risks for future economic growth and social cohesion. Pro-poor policies, such as improving rural infrastructure, expanding access to quality education and labor MARKET mobility, would boost the earnings of poor and vulnerable families and help combat inequality,' says Lead Economist
Inequality is one of the key focus of the
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